In a recent decision, the Ontario Superior Court of Justice has
ordered a third party – a receiver appointed pursuant to
a court order – to disclose documents to a respondent in
a proceeding before the Ontario Securities Commission (the OSC), in
order to permit the respondent to make full answer and
defence. SA Capital Corp. v. Mander Estate has
the potential to expand the circumstances in which a non-party to
an OSC proceeding may have to respond to document requests.
Mander arises out of an alleged Ponzi scheme carried
out through various corporations. RSM Richter Inc., now Duff
& Phelps Canada Restructuring Inc. (the Receiver), was
appointed as receiver of one company and the individual alleged to
have been the driving force behind the Ponzi scheme. The
Receiver was subsequently appointed, pursuant to the Securities
Act, as receiver of a second group of companies whose
principal was Dr. Peter Sbaraglia. Dr. Sbaraglia was named as
the respondent in a proceeding, commenced in February, 2011,
pursuant to s.127 of the Securities Act. It is
alleged that Dr. Sbaraglia acted contrary to the public interest
by, among other things, misleading investors, misappropriating
funds and misleading OSC Staff (Staff).
Dr. Sbaraglia received full disclosure from Staff of all
relevant, non-privileged information in the Staff's possession
or control. The right of an accused to receive full
disclosure from the Crown in a criminal prosecution is established
in the Supreme Court of Canada's decision in R. v.
Stinchcombe, and it is well established that Staff may have an
obligation to make Stinchcombe-level disclosure in
administrative hearings before the OSC.
However, Dr. Sbaraglia also sought access to documents that were
not in Staff's possession or control; namely, documents that
the Receiver had gathered in the course of carrying out its duties
under the Court orders appointing it. During the course of
its investigation, the Receiver had interviewed a number of people,
assembled paper records and recovered deleted computer files.
Dr. Sbaraglia applied to the Court for an order compelling the
Receiver to produce this material to him in order that he could
make full answer and defence to the charges against him.
In R. v. O'Connor, the Supreme Court of Canada held
that in a criminal case, a third party may be ordered to produce
information where the accused cannot obtain the information
elsewhere and the information is likely relevant to the case
against the accused, and after considering a number of other
factors. Dr. Sbaraglia applied to the Court for an order
requiring the Receiver to produce records in its possession,
applying the O'Connor principles to the s.127
The Court accepted that the O'Connor principles
could be applied to the s.127 proceeding, and ordered the Receiver
to make production of certain of the records requested. The
Receiver objected, in particular because it was under a duty to use
information gathered solely for the purposes of the proceeding in
which it was appointed. The Court did not accept this
argument, holding that the O'Connor principles
"are of general application to records held by all third
parties, regardless of whether they are private citizens,
government agencies or court officers."
This decision, which is currently under appeal, may well give
rise to an increase in OSC respondents seeking production of
documents from third parties, particularly given the Court's
apparent wholesale adoption of the O'Connor principles
in the context of the s.127 hearing1. Given the
Court's broad interpretation of the applicability of
O'Connor, auditors, receivers, consultants and many
others may find themselves responding to applications for the
production of records in their possession. Although the onus
on the party seeking production from a non-party is high,
respondents who are dissatisfied with Staff's disclosure may
start bringing O'Connor applications more frequently
in light of the Mander decision.
1.There is precedent for the application of theO'Connorprinciples in a criminal
prosecution under theSecurities
Act: seeR. v.
Gouveia,  CarswellOnt 5173 (Ont. Ct.
to be the first reported decision in which theO'Connorprinciples have been applied
in an administrative hearing under s.127.
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guide to the subject matter. Specialist advice should be sought
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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